Hostess will liquidate as mediation fails

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(NEW YORK) — Hostess Brands Inc. announced late Tuesday that court-ordered mediation with the Bakery, Confectionary, Tobacco and Grain Millers International Union was unsuccessful.

A hearing is scheduled for eleven o'clock EST Wednesday in U.S. Bankruptcy Court for the Southern District of New York. It's expected the court will approve the company's liquidation.

On Monday, the bankruptcy judge ordered the mediation. The BCTGM, which represents about 30 percent of Hostess workers, went on strike November 9.

Workers are protesting contract changes imposed by the bankruptcy court. The changes call for an 8 percent pay cut, a 17 percent increase in employee health care costs and overtime pay based on a 40-hour work week instead of an eight-hour work day.

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The bakers union says they have already made concessions and called the proposed changes "outrageous."

A liquidation would result in some 18,500 workers losing their jobs and an uncertain future for American icons Twinkies, Ding Dongs and Wonder Bread. Several companies have expressed interest in purchasing the brands should Hostess liquidate.

Hostess owns and operates 33 bakeries nationwide, including the Dolly Madison bakery in Emporia and a bread plant in Lenexa. It also runs 565 distribution centers, approximately 5,500 delivery routes and 570 bakery outlet stores across the United States.

The Emporia facility is the city's second largest employer with 600+ people. The Lenexa facility has 200 employees. All Hostess facilities remain closed as of Monday.

Hostess' financial problems are not new. Hostess filed for bankruptcy in January, the second time it has done so since 2004.

The Wall Street Journal reports that in July 2011, top executives received a 75-to-80 percent pay increase. Earlier this year, when Greg Rayburn became Hostess' sixth CEO in a decade, he reduced those same executives' salaries to one dollar. Hostess also has $2 billion in unfunded pension liabilities to various unions' workers.

*Information from The Associated Press and Reuters was used in this report.